Tata Capital Housing Finance Ltd (TCHFL), a wholly-owned subsidiary of Tata Capital Ltd, launched its maiden public issue of secured and unsecured redeemable non-convertible debentures (NCDs) worth ₹2,000 crore on Monday.
The debentures are rated AAA/stable by rating agencies Crisil Ltd and Icra.
The lead managers to the issue are Edelweiss Financial Services Ltd and A.K. Capital Services Ltd.
As on 30 September 2019, the housing finance firm had raised a total debt of ₹26,120 crore. Of this, bank borrowings comprised 43%, funding from the National Housing Bank (NHB) 21%, sub-debt 2%, external commercial borrowings 2%, cumulative compulsory convertible preference shares (CCCPS) 6%, bonds 15%, and commercial papers the remaining 11%, according to the company’s presentation.
“Our strategy has been to diversify our borrowings, increase loan tenures and bring down the cost of funds. What we have done is reduced our borrowing from commercial papers and increased borrowing from public NCDs, as well as bank borrowings, to match our assets with long tenure loans," Rajiv Sabharwal, managing director and chief executive, Tata Capital Ltd, said in an interview.
The company also got a capital infusion from its parent, which further improved its gearing level (the ratio of its borrowed funds to its equity) to 9.5 times, he said. “At the beginning of FY20, Tata Capital infused ₹300 crore into TCHFL. The capital infusion from the parent is based on its loan book."
In terms of growth strategy, Sabharwal said, the company would seek to grow the affordable housing loans portfolio to 30% of its book over the next 12 months. “We are increasing our presence in the affordable housing segment, which we believe will give us better NIMs (net interest margins, a measure of profitability) than the normal housing loans. In fact, this will be the biggest part of our strategy in trying to ensure that NIMs improve," he said.
As on 30 September, mortgage loans (home loans and home equity) made up 87.79% of the company’s loan book, and construction finance loans the remaining 12.21%.
The affordable housing finance portfolio, according to Anil Kaul, managing director of Tata Capital Housing Finance, currently comprises 20% of its total loan assets. “We will continue to increase our presence without compromising on asset quality; a 10% change is a significant jump. This proportion of change will positively impact on our NIMs and we could seem them moving north of 3%," he added.